Untaxed Cigarette Sting Leads to 21 Arrests

Westchester County District Attorney Janet DiFiore, New York State Taxation and Finance Acting Commissioner Jamie Woodward and Yonkers Police Commissioner Edmund Hartnett announced that a yearlong investigation utilizing a multi-agency, multi-jurisdiction undercover operation carried out by the New York State Office of Tax Enforcement, Yonkers Police Department, New York City Police Department and Westchester County District Attorney’s office in which sales and purchases of more than nine million unstamped cigarettes resulted in a twenty one million dollar New York State cigarette excise tax stamp fraud and 21 individuals being arrested.

Also uncovered in the course of the investigation, an individual was arrested in the possession of five suspected homemade explosive devices, fourteen rifles, a pump action shotgun and thousands of rounds of ammunition.

On multiple occasions the defendants spent over sixteen million dollars purchasing the unstamped cigarettes from undercover New York State Tax Investigators.

The illegal purchases resulted in over twenty one million dollars of lost excise and sales tax revenue to New York State and New York City.

The defendants, acting as middlemen, would then resell the unstamped cigarettes at a sizable profit to small businesses for individual sale.

The investigation was based on information, developed from a Confidential Informant by the Office of Tax Enforcement of the New York State Taxation and Finance Department that the defendant’s were looking to illegally purchase cigarettes on the black market.

During the course of the investigation, the investigative team made contact with approximately 60 targets and represented they had access to unstamped cigarettes for sale.

All of the subjects have purchased illegal cigarettes, never paying the $42.50 excise tax or the sales tax on the cigarette cartons and never reporting the purchases or sales to the State. They would routinely purchase hundreds of cartons of unstamped cigarettes at a time.

The Felony charges that each may face can include: Criminal Tax Fraud in the First Degree, a class “B” Felony, Criminal Tax Fraud in the Second Degree, a class “C” Felony, Criminal Possession of a Forged Instrument, in the First Degree, a class “C” Felony, Criminal Tax Fraud in the Third Degree, a class “D” Felony, Possession or Transport of Thirty Thousand or more or Unlawfully Stamped Cigarettes for the Purpose of Sale , a class “D” Felony a violation of New York State Tax Law, Attempt to Evade or Defeat the Taxes Imposed by Article 20 of the Tax Law of the State of New York, a class “E” Felony, Possession or Transport of Ten Thousand or more or Unlawfully Stamped Cigarettes for the Purpose of Sale , a class “E” Felony a violation of New York State Tax Law.

Individuals charged in this investigation, for the first time, will be under new enhanced New York State laws expressly targeting these tax crimes.

Also charged is: Gary Burstell (DOB 11/06/56 ) 55 Lockwood Road, Cortlandt Manor , NY with one count of Criminal Possession of a Weapon in the Third Degree, a class “D” Felony.

Warrants were executed at various locations in the New York Metropolitan Area resulting in the closure of a fraudulent tax stamping operation being run out of a storage facility in the Bronx.

New York State imposes an excise tax on cigarettes in the amount of $2.75 per pack of twenty cigarettes. Additionally, New York City is permitted to impose an additional $1.50 per pack, bringing the total combined tax rate to $4.25.

New York State collects the cigarette tax through the sale of tax stamps, which are sold to licensed New York State stamping agents. An agent must affix the stamps to packages of cigarettes in order for those packages to be sold in New York State.

The stamping agent can then sell the cigarettes to wholesale or retail businesses.

To circumvent the excise taxes, and earn more profit on cigarette sales, some cigarette dealers illegally purchase unstamped cigarettes from unauthorized sources.

New York State Office of Tax Enforcement, Yonkers Police Department Intelligence Unit, New York City Police Department Intelligence Division, Westchester County Police Bomb Squad and Westchester County District Attorney’s office participated in various aspects of the investigation. Burstell faces a maximum of seven years in state prison. The other defendants face a maximum of eight and one third to twenty five years in state prison.

Below are the laws violated:

N.Y. Tax. Law § 1804 : NY Code – Section 1804: Criminal tax fraud in the third degree – A person commits criminal tax fraud in the third degree when he or she commits a tax fraud act or acts and, with the intent to evade any tax due under this chapter, or to defraud the state or any political subdivision of the state, the person pays the state and/or a political subdivision of the state (whether by means of underpayment or receipt of refund or both), in a period of not more than one year in excess of ten thousand dollars less than the tax liability that is due. Criminal tax fraud in the third degree is a class D felony.

N.Y. Tax. Law § 1805 : NY Code – Section 1805: Criminal tax fraud in the second degree – A person commits criminal tax fraud in the second degree when he or she commits a tax fraud act or acts and, with the intent to evade any tax due under this chapter, or to defraud the state or any subdivision of the state, the person pays the state and/or a political subdivision of the state (whether by means of underpayment or receipt of refund or both), in a period of not more than one year in excess of fifty thousand dollars less than the tax liability that is due. Criminal tax fraud in the second degree is a class C felony.

N.Y. Tax. Law § 1806 : NY Code – Section 1806: Criminal tax fraud in the first degree – A person commits criminal tax fraud in the first degree when he or she commits a tax fraud act or acts and, with the intent to evade any tax due under this chapter, or to defraud the state or any subdivision of the state, the person pays the state and/or a political subdivision of the state (whether by means of underpayment or receipt of refund or both), in a period of not more than one year in excess of one million dollars less than the tax liability that is due. Criminal tax fraud in the first degree is a class B felony.

Thus if you or your loved ones has been arrested and/or charged with the above crimes, it is important that you seek the legal advice of an expert New York Criminal Defense Lawyer at Stephen Bilkis and Associates to help you find the best possible legal remedy and defenses under the law. Visit our offices located around New York Metropolitan for free legal consultation.